April, 2008

March, 2008

October, 2007

As we approach the UK Autumn Spending Review, more and more authoritative voices will be heard calling for cuts in UK Corporation Tax. Already the CBI and IoD have suggested 18% and 15% respectively as the right target.

Why? The following chart posted today by The Independents Ben Chu makes it clear that UK rates are already significantly below all of our major competitors.

Tax rate

Tax rate

Tax rate

pre-tax profit

of US$100,000)

pre-tax profit

of US$1 million)

(pre-tax profit

of US$100 million)

Brazil

34%

Japan

42%

Japan

42%

Germany

32%

USA

34%

USA

35%

Italy

31%

Brazil

34%

France

34%

Japan

31%

France

33%

Brazil

34%

India

31%

Germany

32%

Germany

32%

Mexico

30%

India

32%

India

32%

Australia

30%

Italy

31%

Italy

31%

China

25%

Australia

30%

Australia

30%

Malaysia

25%

Mexico

30%

Mexico

30%

Spain

25%

Spain

28%

Spain

30%

Israel

24%

China

25%

Canada

29%

France

23%

Malaysia

25%

UK

26%

USA

22%

Israel

24%

China

25%

Netherlands

20%

UK

24%

Malaysia

25%

Russia

20%

Netherlands

24%

Netherlands

24%

UK

20%

Canada

22%

Israel

24%

Romania

16%

Russia

20%

Russia

20%

Canada

15.5%

Romania

16%

Romania

16%

Ireland

12.5%

Ireland

12.5%

Ireland

But this is theory, we can be absolutely certain that in reality large corporations do not pay much tax - calling for a cut from 26% to 18% is window dressing. For instance in 2009 Barclays made a profit of £4585 million, and therefore should have paid £1192 million in tax. In fact their tax bill was for £113 million - or 2.5%.

The debate about the level of corporation tax in the UK is just diversionary noise. Like Big Brother, The X Factor or the story of how Michael Jackson died, it is intended to keep us distracted. Bread and circuses for all.